How to maximize your termination settlement

Howard Levitt, Financial Post01.10.2013

What terminated employees care most about is what they end up with after paying their legal bill. So, if a case is worth $100,000, it's better to pay a lawyer who, because of their acumen, recovers $180,000, expending five hours of time in six weeks, than to a lawyer who recovers the $100,000 the case is worth after spending 200 hours in two-plus years.

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Lawyers acting for employees make the bulk of their fees from the result, not time spent on the case, which is good for clients. What terminated employees care most about is what they end up with after paying their legal bill. So, if a case is worth $100,000, it's better to pay a lawyer who, because of their acumen, recovers $180,000, expending five hours of time in six weeks, than to a lawyer who recovers the $100,000 the case is worth after spending 200 hours in two-plus years.

So, what is the prescription for a good settlement?

Knowing the law: The more knowledgeable a lawyer, the greater the chance he or she comes up with an imaginative approach to maximize the client's damage entitlement. Equally important, a well-versed employment lawyer can see through the employers' defences and, to the extent those defences have substance, know what facts and arguments might vitiate them.

Preparedness to fight: Check your lawyer's trial record. Many employment lawyers have been through only one or two trials in their careers; some have never gone to court. Employers offer less to employees represented by counsel they know will ultimately collapse at the trial door. The better a lawyer's success rate at trial, the better the settlement they command.

Understanding the hidden (and not so hidden) persuaders: Employers settle cases based on an assessment of the costs of not settling. The two factors that apply to every case are: what a court would award the employee and what is the chance the employee will go that far. Most employers offer less severance than a court might award but enough that the employee might conclude that proceeding further is not worth the time and expense.

But in some cases there are what I call the hidden persuaders — things that motivate the employer to offer far, far more than a court could ever award.

Sometimes these are so obvious the employer will calculate them into its initial severance offer. If it doesn't, it can easily be reminded. Those persuaders include the poor morale of colleagues or the impact on revenues if, for example, the termination of a popular employee or well-liked sales person is seen to have been mishandled.

There are some cases where the facts, if they go to trial, can seriously damage a company or its executives. In those cases, a very large amount is quickly offered.

If the company has engaged in activities that would result in criminal or regulatory scrutiny or could give rise to a class action and the employment case would result in those facts being publicized, settling that case would be worth vastly more than the amount that is legally at stake.

Similarly, if the company or its officers have engaged in calumnious conduct, such as deprecatory or duplicitous conduct toward customers and that behaviour would come to light if the case went to trial, then the company might pay dramatically more than the inherent value of the wrongful dismissal case to ensure that it did not.

And also, if a married executive sexually harassed an employee, that executive might pay, or arrange for the company to pay, a considerable amount to avoid witnesses being called to a public trial or even to avoid having those allegations raised in a Statement of Claim on the public record that anyone (and it had better not be the employee or their counsel) could potentially “brown envelope” to their spouse.

But these hidden persuaders must be deftly applied. A lawyer, or his client, cannot threaten this type of sanction if monies are not paid. It is, in some cases, criminal conduct to do so. The allegations in the claim must be relevant to the case. And the lawyer, to succeed, must be trusted by the employer to keep the confidentiality permanently intact, even if acting in the future for another of its employees.

Employers will pay the amount it is worth to settle a case. Depending upon the employee's circumstances, that amount is often much, much more than the amount the employee would likely recover at trial.

Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers. He practises employment law in eight provinces and is author of The Law of Hiring in Canada.

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